Senior Policy Analyst
The Trump Administration is encouraging states to pursue “1332” waivers that would weaken health coverage and likely raise consumer costs by letting states depart from some Affordable Care Act (ACA) standards and requirements. But so far, no state has submitted a 1332 waiver proposal to implement the Administration’s new concepts.
The Administration issued guidance last fall to weaken the standards that 1332 waivers must meet, saying that the Obama-era guidance was too restrictive. It then released a paper outlining the sorts of new 1332 waivers it would welcome, including types of premium assistance that could vary by state (such as flat tax credits adjusted for age but not income), reduced standards for health plans, and capped personal accounts to take the place of existing subsidies for premiums, deductibles, and other cost-sharing.
But the prior guidance wasn’t stopping states from pursuing new types of 1332 waivers, as the Administration claims. Instead, it was that 1332 waivers rightly require states to meet statutory guardrails for enrollment, affordability, and comprehensiveness; otherwise, they’d leave many people worse off. A fourth guardrail requires that state 1332 proposals not increase the federal deficit. As it turns out, it’s hard to use a 1332 waiver to improve on the ACA’s enrollment, affordability, and comprehensiveness — especially without investing more resources.
Successful and unsuccessful waiver applications to date illustrate this point.
States have used 1332 waivers to set up seven successful reinsurance programs, and more are in the works. These are state-funded programs that reimburse insurers for part of the cost of covering high-cost enrollees in marketplace plans, thereby reducing premiums. That, in turn, lowers federal costs for premium tax credits, and, under those waivers, the federal government passes those savings on to the state. Reinsurance waivers improve premium affordability and maintain or improve enrollment, without weakening coverage or adding to the federal deficit, because states invest some of their own resources to set them up.
Conversely, in 2017, Iowa nearly finalized a 1332 waiver plan similar to one of the Administration’s proposed concepts. But the state concluded that it couldn’t design a proposal that wouldn’t leave many residents worse off without a guarantee of more federal funding than the state would receive under a deficit-neutral waiver.
The Administration recently asked, through a formal comment process, for more ideas about how states might use 1332 waivers. We recommended three ideas that might be attractive to some states and are consistent with the guardrails. But they’d require the Administration to give states flexibility to pursue waivers that conflict with the ideological commitments of its waiver guidance by discouraging non-ACA-compliant plans, encouraging the pooling of risk, and expanding public coverage. States could propose waivers that: